The IRS plans to start processing a backlog of about 1,250 pending applications seeking regulatory approval for cash balance conversions, according to the agency's website, www.irs.gov. The agency plans to issue determination letters on 90% of the conversion applications during fiscal 2007, which ends Sept. 30.
The IRS froze conversion applications in September 1999, after questions arose about whether cash balance conversions discriminated against older workers. But the Aug. 17 adoption of the Pension Protection Act provided the "statutory guidance that will allow for the processing of these applications," the IRS said in a statement. Among other things, the pension reform law held that cash balance plans, at least new ones, would not be discriminatory based on age.
Plan sponsors seek IRS approval for assurance that contributions to a cash balance plan will be deductible for employers and tax-deferred for plan participants.
